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EARNINGS REVIEW
Punj Lloyd (PUJL.BO)
Neutral Equity Research
Above expectation EBITDA counterbalanced by high finance cost
What surprised us
Punj Lloyd reported 4QFY12 revenues of Rs 30.4bn, above Street estimate
of Rs 27.2bn, but in-line with our estimate. EBITDA came in 24%/32%
above GS/Bloomberg consensus, as the company reported improvement
in EBITDA margin (260 bps qoq) due to lower contractor charges and forex
gains. Higher interest expenses in the quarter (up 15% qoq) resulted in net
income of Rs 90mn, down 49% yoy. Weak order inflow in 4Q (Rs 10.5bn,
67% below GS estimate) resulted in closing order book declining by 4%
qoq to Rs 273bn.
What to do with the stock
Punj Lloyd has now shown a better execution pace compared to the last
two years, while also improving order backlog coverage (2.6X on FY12
revenues). However we continue to be concerned on low and volatile
margins, high leverage (1.54X Net Debt to Equity as of FY12) and decline
in order inflows in Q4. The mix of inflows for the company has also
improved recently with 38% from pipeline segment over the last 12m but
margins on these highly competitively bid orders could be low compared
to history. We retain our Neutral rating for the stock and raise our
FY13/14E EPS by 11/5% based on slightly better margins and execution
rate. Consequently our P/B based 12m TP increases to Rs 58 (from Rs 57
earlier) which implies 10X multiple on FY13E earnings. The stock trades at
12-m fwd P/B of 0.5X which in our view is justified by the 6% ROE we
expect it to generate in FY13E. Key isks: upside: higher than expected
order inflow; downside: higher commodity prices, delay in pick-up of
capex.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Punj Lloyd (PUJL.BO)
Neutral Equity Research
Above expectation EBITDA counterbalanced by high finance cost
What surprised us
Punj Lloyd reported 4QFY12 revenues of Rs 30.4bn, above Street estimate
of Rs 27.2bn, but in-line with our estimate. EBITDA came in 24%/32%
above GS/Bloomberg consensus, as the company reported improvement
in EBITDA margin (260 bps qoq) due to lower contractor charges and forex
gains. Higher interest expenses in the quarter (up 15% qoq) resulted in net
income of Rs 90mn, down 49% yoy. Weak order inflow in 4Q (Rs 10.5bn,
67% below GS estimate) resulted in closing order book declining by 4%
qoq to Rs 273bn.
What to do with the stock
Punj Lloyd has now shown a better execution pace compared to the last
two years, while also improving order backlog coverage (2.6X on FY12
revenues). However we continue to be concerned on low and volatile
margins, high leverage (1.54X Net Debt to Equity as of FY12) and decline
in order inflows in Q4. The mix of inflows for the company has also
improved recently with 38% from pipeline segment over the last 12m but
margins on these highly competitively bid orders could be low compared
to history. We retain our Neutral rating for the stock and raise our
FY13/14E EPS by 11/5% based on slightly better margins and execution
rate. Consequently our P/B based 12m TP increases to Rs 58 (from Rs 57
earlier) which implies 10X multiple on FY13E earnings. The stock trades at
12-m fwd P/B of 0.5X which in our view is justified by the 6% ROE we
expect it to generate in FY13E. Key isks: upside: higher than expected
order inflow; downside: higher commodity prices, delay in pick-up of
capex.
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